Question 1

Costs incurred because products or services fail to meet requirements after delivery to customers are called

Accepted Answer

A)  external failure costs. 
B)  internal failure costs. 
C)  appraisal costs. 
D)  prevention costs. 
A)  external failure costs. 
B)  internal failure costs. 
C)  appraisal costs. 
D)  prevention costs.

Question 2

Labour and overhead incurred for rework of defective products is a(n)

Accepted Answer

A)  prevention cost. 
B)  appraisal cost. 
C)  internal failure cost. 
D)  external failure cost. 
A)  prevention cost. 
B)  appraisal cost. 
C)  internal failure cost. 
D)  external failure cost.

Question 3

Kaizen costing is

Accepted Answer

A)  continuous improvement with the objective of cost reduction. 
B)  characterized by constant improvements to existing processes and products. 
C)  characterized by incremental improvement to existing processes and products. 
D)  all of the above. 
A)  continuous improvement with the objective of cost reduction. 
B)  characterized by constant improvements to existing processes and products. 
C)  characterized by incremental improvement to existing processes and products. 
D)  all of the above.

Question 4

Quality training programs are

Accepted Answer

A)  prevention costs. 
B)  appraisal costs. 
C)  internal failure costs. 
D)  external failure costs. 
A)  prevention costs. 
B)  appraisal costs. 
C)  internal failure costs. 
D)  external failure costs.

Question 5

Figure 21-2
A company has 20 days of finished goods inventory on hand to avoid stockouts. The carrying costs of the inventory average £5,000 per day.
-Refer to Figure 21-2. The nonvalue-added costs are

Accepted Answer

A)  £100,000. 
B)  £10,000. 
C)  £5,000. 
D)  £250. 
A)  £100,000. 
B)  £10,000. 
C)  £5,000. 
D)  £250.

Question 6

Which of the following process dimensions of the activity-based management model deals with "why"?

Accepted Answer

A)  resources 
B)  cost driver analysis 
C)  activities 
D)  performance measures 
A)  resources 
B)  cost driver analysis 
C)  activities 
D)  performance measures

Question 7

The just-in-time (JIT) approach to inventory management

Accepted Answer

A)  allows greater flexibility as to when products can be manufactured. 
B)  results in higher inventory levels but reduces ordering and setup costs. 
C)  results in lower inventory carrying costs. 
D)  None of the above are correct. 
A)  allows greater flexibility as to when products can be manufactured. 
B)  results in higher inventory levels but reduces ordering and setup costs. 
C)  results in lower inventory carrying costs. 
D)  None of the above are correct.

Question 8

Activity-based management attempts to

Accepted Answer

A)  identify and eliminate all unnecessary activities. 
B)  increase the efficiency of necessary activities. 
C)  add new activities that increase value. 
D)  do all of the above. 
A)  identify and eliminate all unnecessary activities. 
B)  increase the efficiency of necessary activities. 
C)  add new activities that increase value. 
D)  do all of the above.

Question 9

Figure 21-8
At the beginning of the year, Grant Company initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years:  
-Define value chain. What is the relationship among a value chain, processes, and activities?

Accepted Answer

The value chain for a product or service

Question 10

A time-and-motion study revealed that it should take 2 hours to produce a product that currently takes 6 hours to produce. Labour is £8 per hour. The nonvalue-added costs are

Accepted Answer

A)  £16. 
B)  £32. 
C)  £48. 
D)  £-0-. 
A)  £16. 
B)  £32. 
C)  £48. 
D)  £-0-.

Question 11

Lower sales due to poor product performance is an example of

Accepted Answer

A)  external failure costs. 
B)  an internal failure cost. 
C)  an appraisal cost. 
D)  a prevention cost. 
A)  external failure costs. 
B)  an internal failure cost. 
C)  an appraisal cost. 
D)  a prevention cost.

Question 12

Over the LONG-TERM, prevention costs are expected to

Accepted Answer

A)  decrease as failure costs decrease. 
B)  increase as failure costs increase. 
C)  increase as failure costs decrease. 
D)  decrease as failure costs increase. 
A)  decrease as failure costs decrease. 
B)  increase as failure costs increase. 
C)  increase as failure costs decrease. 
D)  decrease as failure costs increase.

Question 13

Figure 21-4
Rollo Company has developed cost formulas for the drivers of the following production activities:  
-Refer to Figure 21-4. The budgeted inspection cost for 20 setups is

Accepted Answer

A)  £175,860. 
B)  £40,000. 
C)  £34,000. 
D)  £30,000. 
A)  £175,860. 
B)  £40,000. 
C)  £34,000. 
D)  £30,000.

Question 14

Figure 21-3
A firm's warranty costs are £125,000 per year. A competitor's warranty costs are £25,000 per year.
-Refer to Figure 21-3. The nonvalue-added costs are

Accepted Answer

A)  £125,000. 
B)  £100,000. 
C)  £25,000. 
D)  £0. 
A)  £125,000. 
B)  £100,000. 
C)  £25,000. 
D)  £0.

Question 15

Figure 21-8
At the beginning of the year, Grant Company initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years:  
-Craig, SA., sells one of its products for £500 each. Sales volume averages 1,000 units per year. Recently, its main competitor priced their competing product at 10 per cent below Craig's price. Craig expects its sales to drop dramatically unless it matches the competitor's price. Despite the anticipated price reduction, Craig would like to maintain its current profit per unit.
Information regarding the inputs required to produce 1,000 units of product is as follows:   Required: 
a.
Calculate the target cost for maintaining current market share and profitability.
b.
Calculate the nonvalue-added cost per unit.
c.
If nonvalue-added costs can be reduced to zero, can the target cost be achieved?

Accepted Answer

The answer of Figure 21-8
At the beginning of the year,...

Question 16

____ are those activities necessary to remain in business.

Accepted Answer

A)  Activity inputs 
B)  Activity outputs 
C)  Activity drivers 
D)  Value-added activities 
A)  Activity inputs 
B)  Activity outputs 
C)  Activity drivers 
D)  Value-added activities

Question 17

Which of the following is TRUE about a manufacturing cell?

Accepted Answer

A)  There is increased movement of work in process. 
B)  It usually produces a particular product or product family. 
C)  Workers are highly specialized. 
D)  Supervision is important. 
A)  There is increased movement of work in process. 
B)  It usually produces a particular product or product family. 
C)  Workers are highly specialized. 
D)  Supervision is important.

Question 18

Inspecting the components and the finished product is

Accepted Answer

A)  necessary to assure TQM. 
B)  a nonvalue-added activity. 
C)  a value-added activity. 
D)  none of the above. 
A)  necessary to assure TQM. 
B)  a nonvalue-added activity. 
C)  a value-added activity. 
D)  none of the above.

Question 19

Under JIT, the number and magnitude of direct fixed costs

Accepted Answer

A)  decreases. 
B)  increases. 
C)  stays the same. 
D)  are eliminated. 
A)  decreases. 
B)  increases. 
C)  stays the same. 
D)  are eliminated.

Question 20

Figure 21-8
At the beginning of the year, Grant Company initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years:  
-Refer to Figure 21-8. For the current year, appraisal costs are what percentage of sales?

Accepted Answer

A)  1.40% 
B)  1.00% 
C)  0.14% 
D)  0.40% 
A)  1.40% 
B)  1.00% 
C)  0.14% 
D)  0.40%

Exam 21: Cost Management

Costs incurred because products or services fail to meet requirements after delivery to customers are called

Labour and overhead incurred for rework of defective products is a(n)

Kaizen costing is

Quality training programs are

Figure 21-2 A company has 20 days of finished goods inventory on hand to avoid stockouts. The carrying costs of the inventory average £5,000 per day. -Refer to Figure 21-2. The nonvalue-added costs are

Which of the following process dimensions of the activity-based management model deals with "why"?

The just-in-time (JIT) approach to inventory management

Activity-based management attempts to

A time-and-motion study revealed that it should take 2 hours to produce a product that currently takes 6 hours to produce. Labour is £8 per hour. The nonvalue-added costs are

Lower sales due to poor product performance is an example of

Over the LONG-TERM, prevention costs are expected to

Figure 21-4 Rollo Company has developed cost formulas for the drivers of the following production activities: -Refer to Figure 21-4. The budgeted inspection cost for 20 setups is

Figure 21-3 A firm's warranty costs are £125,000 per year. A competitor's warranty costs are £25,000 per year. -Refer to Figure 21-3. The nonvalue-added costs are

____ are those activities necessary to remain in business.

Which of the following is TRUE about a manufacturing cell?

Inspecting the components and the finished product is

Under JIT, the number and magnitude of direct fixed costs

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost Assignment

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Pricing Decisions and Profitability Analysis

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Standard Costing and Variance Analysis 2: Further Aspects

Divisional Financial Performance Measures

Transfer Pricing in Divisionalized Companies

Strategic Management Accounting

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Stocks

The Application of Linear Programming to Management Accounting

Filters